Sydney, 30 September, 2008: The Australian Bankers’ Association (ABA) said the instability of some overseas financial institutions helps demonstrate the value of the Australian banking sector’s strength.
Also, recent reports from the Reserve Bank of Australia and the International Monetary Fund (IMF) have underlined that our banking sector is sound and in good shape to withstand the current credit crisis.
The Reserve Bank recently stated:
“The Australian financial system has coped better with the recent turmoil than many other financial systems. The banking system is soundly capitalised, it has only limited exposure to sub-prime related assets, and it continues to record strong profitability and has low levels of problem loans. The large Australian banks all have high credit ratings and they have been able to continue to tap both domestic and offshore capital markets on a regular basis. Credit standards in Australia over the past decade were not eased to anywhere near the same extent as in the United States. In Australia, non-conforming housing loans – the closest equivalent to US sub-prime loans – account for less than 1 per cent of outstanding housing loans, with virtually all of these loans made by specialist non-bank lenders. Moreover, arrears rates on prime Australian mortgages have historically been lower than in many other countries and remain so.”1
The IMF recently noted that:
“The aggregate financial soundness indicators for the banking system remained strong through early 2008. The turmoil did not affect banks’ strong capitalization and profitability, and impaired assets remain very low by international standards, at 0.3 percent of total assets.” 2
David Bell, Chief Executive of the ABA, said: “Ultimately, the key long-term community benefit of a strong banking system is that the two core services banks provide – making loans from depositors’ money and operating transaction accounts - will be maintained efficiently. This is continuing despite the current uncertainty on financial markets, both here and overseas.”
In fact, banks have been critical to underpinning growth and investment during tough times. In the late 1990s Asian financial crisis, those Asian economies with weak banks were crippled, leading in a number of cases, to economic dislocation and unemployment. Whereas, Australian banks continued to provide business and household loans, and safely accepted deposits.
For further information: Heather Wellard, ABA PR - P: 02 8298 0411
M: 0409 830 439
ENDS
[1] Financial Stability Review, September 2008, page 1. Weblink:
http://www.rba.gov.au/PublicationsAndResearch/FinancialStabilityReview/Sep2008/Pdf/financial_stability_review_0908.pdf
[2] International Monetary Fund, Australia Selected Issues, Prepared by Ben Hunt and Dmitriy Rozhkov (APD) Approved by the Asia and Pacific Department August 18, 2008, page 19. Weblink: http://www.treasury.gov.au/documents/1419/PDF/Final%20SI.pdf